President Donald Trump’s escalating trade war with Canada could amount to the largest tax increase in Indiana’s history and jeopardize hundreds of thousands of manufacturing and farm jobs, according to Ball State University economist Michael Hicks.

In an interview with Indy Politics, Hicks detailed how the administration’s new 50% tariffs on Canadian imports—and Canada’s matching retaliatory tariffs—threaten to pummel Indiana’s export-driven economy, particularly its manufacturers and farmers.

From NAFTA to USMCA – and Now a Trade War

Hicks explained that the current conflict stems from the Trump administration’s handling of the USMCA, the successor to NAFTA. While Trump hailed USMCA as “the best trade deal ever,” Hicks said the 2018–2019 renegotiation actually changed “almost nothing” beyond some digital copyright rules.

The real flashpoint, he argued, was a U.S. demand that Canada effectively mirror American trade policy with other countries and apply U.S.-style rules to its non-U.S. trading partners.

Canada refused, and in response, Trump imposed a 50% tariff on Canadian imports. Under that tariff, anything Hoosiers buy from Canada now costs roughly 150% of the previous price, Hicks said. Canada responded with reciprocal tariffs, meaning Canadians will also pay 50% more on U.S. goods.

Indiana’s Trade With Canada: Big Numbers, Bigger Risk

Canada is Indiana’s single largest trading partner. The state buys between $6.6 and $7 billion a year from Canada—primarily pharmaceuticals, finished metals, motor vehicle and RV parts, aluminum, and agricultural products—while selling $12 to $13 billion back in goods ranging from autos and parts to farm commodities.

That imbalance, usually a boon for Indiana, now turns into a liability.

Hicks estimates the 50% tariff on Canadian imports alone represents roughly a $3 to $3.5 billion tax increase on Hoosiers, which he called the biggest tax increase in Indiana history. Spread across households, that’s about $1,200 to $1,300 per family per year for at least the next two years.

And that’s before accounting for the hit to Indiana’s exports.

Hicks said Indiana’s exports to Canada had been near $15 billion in 2023–2024 but already dropped under $13 billion after Trump’s first round of tariffs. With the new 50% tariff level and Canadian retaliation, he said he wouldn’t be surprised if exports fall below $9 billion, possibly to $8–8.5 billion.

Because each $1 billion in exports supports about 30,000 manufacturing jobs, Hicks warned Indiana could see well over 100,000 manufacturing jobs at risk from lost exports alone, plus another 150,000 to 200,000 jobs affected by the effective tax on imports.

Historical Echoes: Smoot-Hawley and the Great Depression

Hicks also raised alarms about the legal and historical footing of the tariffs. He said Trump is invoking authority rooted in the Smoot-Hawley Tariff Act of 1930, a measure widely blamed by economists for turning a serious recession into the Great Depression by triggering global retaliation and financial panic.

He called it “one of the single worst economic policies” of the last two centuries and argued the new tariffs have no real economic benefit for either Americans or Canadians. Instead, he said, the fallout will be felt most acutely in Midwestern states—Indiana, Wisconsin, Michigan, and Ohio—in both manufacturing and agriculture.

Long-Term Damage and Political Fallout

Beyond the immediate numbers, Hicks warned of long-term structural damage. He believes Canadian businesses, frustrated by what he described as the erratic nature of U.S. trade policy, will begin systematically shifting purchases away from American suppliers to countries like China, Germany, and Brazil.

That shift, he argued, could create a permanent loss of market share for U.S. producers, particularly in states like Indiana that have relied heavily on Canadian demand for autos, parts, and farm goods.

Hicks outlined three possible outcomes: Trump could back down under pressure from governors and members of Congress in key states; federal courts could strike the tariffs down as unconstitutional; or voters could punish the policy at the ballot box, prompting Congress—including Republicans—to reverse course.

For now, he said, Indiana faces higher prices, shrinking exports, and rising job risks, all driven by what he characterized as “stochastic, thoughtless tax policy” aimed at America’s closest ally.

Despite preparing to move east to Winchester, Virginia, Hicks told Indy Politics he’ll still be watching Indiana closely, noting that he still owns a home and pays taxes in the Hoosier State.